Virtual IPES Spring 2017

How does international trade shape social institutions in the developing world? The research literature is conflicted: importing firms may demand their trading partners adhere to higher labor and environmental standards, or they may penalize higher standards that raise costs. This study offers the first large-scale analysis of how firm level trade responds to information about social standards. Contrary to the "race to the bottom" hypothesis, it finds that importers reward exporters for complying with labor and environmental standards. In difference-in-differences estimates from over two thousand manufacturing establishments in 36 countries, achieving compliance is associated a 4% [1%, 7%] average increase in annual purchasing. The effect is robust to controlling for manufacturing performance and reflects both rewards for reaching compliance and penalties for falling out of compliance. The results suggest that activist campaigns and transnational private regulation have created economic incentives for higher social standards in certain trade relationships.

It is often assumed that international public policy agreements impose significant costs on private firms. However, not all firms refuse complying with international agreements, which suggests that private companies may sometime profit from international cooperation. This puzzle has motivated a few studies in international political economy, but virtually none in the area of global public good provision. Expanding on this literature, I investigate how global public good agreements influence the return of private companies, focusing on the type of regulation they are subject to at home. I concentrate on international climate change, and argue that global climate cooperation should hurt the profits of polluting firms only if domestic regulation does not shield them from the costs of international climate agreements. Vice versa, if firms are subject to protective regulatory instruments such as cheap pollution permits, they may in fact gain from international climate agreements that raise expectations about their sustained profitability. To test the argument, I present an event study of the effect of international decisions of the UN Framework Convention on Climate Change (UNFCCC) on 38 major European firms that were assigned free carbon permits through the European Union Emission Trading Scheme (ETS). The empirical analysis lends support to the view that financial markets carefully evaluate the climate negotiations, and the EU-regulated firms profit from UNFCCC decisions related to this mitigation policy. The evidence suggests how international organizations can overcome domestic hurdles in new areas of international cooperation.

"Unequal Demands? How attribution of inequality to the global economy attenuates demands for political reform in China"

Abstract (click to toggle)

When does inequality lead to public demand for political reform? Foundational models in political economy point to the importance of economic inequality in understanding when and how regime change emerges. Yet it remains unclear when citizens come to interpret inequality as a fundamentally political problem, and what role international factors play. Does attribution of inequality to the global economy impact the political effects of inequality? In this paper, I present evidence from two conjoint survey experiments in China designed to explore the political consequences of inequality, and to test international factors that can attenuate inequality induced demands for political reform. Results show that priming inequality leads to greater demand for reform of central government corruption; however, deflecting the attribution of inequality to the international economy attenuates these demands. In a second survey experiment, I replicate the finding that inequality leads to greater demand for anti-corruption reform; provide evidence that the effect is inequality-specific, not a general response to poor economic performance; and show that changing the attribution of inequality attenuates demands for corruption reform, while attempts to displace it using nationalist primes do not. Finally, to illustrate the mechanisms underlying these effects, I present results from topic models of respondents’ open-ended survey answers.